The ongoing debacle between Bitcoin Core and Bitcoin Unlimited has caused quite a few heated debates. Exchanges are forced to take a stance on how they plan to handle a potential bitcoin hard fork. Bitfinex has announced the introduction of Chain Split Tokens, which are a rather unique product. Both tokens will be traded in BTC and USD pairs, without margin trading opportunities.
What Are Chain Split Tokens?
That is the first question coming to people’s minds when reading the Bitfinex announcement. Considering this exchange is the first to offer such a trading instrument, there are a lot of questions. Every Chain Split Token allows Bitfinex users to speculate on how the bitcoin blockchain will evolve, and whether or not there is a fork on the horizon. Two types of tokens have been launched, one representing Bitcoin Core (BCC) and the one for Bitcoin Unlimited (BCU).
Both of these Chain Split Token markets will receive a BTC and USD trading pair. For the time being, traders will not be able to enjoy leveraged margin trading, although such a feature will be made available in the future. Depending on how much liquidity there is in these markets, Bitfinex will determine whether or not margin trading needs to be added. Any speculative asset can benefit from leveraged trading, though.
To create such a Token, one does not simply buy it on Bitfinex. Instead, users have to split a bitcoin through the Token Manager feature. This also means the bitcoin will be removed from one’s account balance and be replaced by BCC and BCU. Reversing this process is possible at any given time, which is a nice bonus. It is an interesting take on creating a basic form of a prediction market, although there are some things investors need to keep in mind.
Bitfinex has projected a deadline of December 31, 2017, by which a hard fork needs to occur. Assuming this does not happen – which seems highly unlikely right now – all BCU tokens will expire and be rendered worthless. Investors will receive bitcoin in return for these tokens. Should a fork occur before that date, all BCU tokens will be exchanged to Bitcoin Unlimited tokens. BCC Tokens will be retired at that point in time as well.
While this concept sounds intriguing, one has to keep in mind this “asset” is essentially worthless in its current form. Although some traders will l look to push up the value of BCC and BCU tokens in the process, investors need to be wary of these tokens at all times. It is interesting to take note of how these tokens are valued, though BCC Tokens are clearly in the lead, indicating strong support. Rest assured some traders will try to take advantage of this whole ordeal, as the splitting process allows for some interesting opportunities.
One thing users have to keep in mind is how Bitfinex does not necessarily have the best track record when it comes to keeping funds safe. Although the company remains successful, they are still in the process of repaying all customers who saw their balances reduced after the most recent hack. So far, the company has successfully redeemed 5% of all of their self-created BFX tokens. It is evident there is still a long way to go, though. Moreover, users can no longer convert 1 BFX token to 1 iFinex shares, as this rate will be changed to 1 BFX token for 0.8 iFinex shares come April 1st.
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